Two local sporting goods companies are racking up high scores.

Not only are consumers spending more money at the stores, but the companies can sell them more of what they want due to better inventory management.

Thanks to all that, both Big 5 Sporting Goods Corp. of El Segundo and Sport Chalet Inc. of La Canada Flintridge have posted hefty same-store sales increases and their earnings exceeded analysts’ estimates. That has led to double-digit gains in their stock prices this month.

It’s not only that more people are shopping there. It’s that the people who do are spending more. For example, someone buying a snowboard a few years ago might have bought a $100 model. But today, that customer is willing to spend $200, as long as it’s got the latest performance features. Or they’re buying ski goggles equipped with video cameras.

“We’ve upgraded our product mix to include the latest in performance technology,” Sports Chalet Chief Executive Craig Levra told the Business Journal last week.

Big 5 Chief Executive Steven Miller said his company has pursued a similar strategy. He told analysts earlier this month that the company’s apparel sales benefited from “an expanded assortment of branded products at stepped up price points.”

Consumer spending

The success of both regional chains follows a national trend of sporting goods companies capitalizing on a recovery in consumer spending after four lean years when shoppers focused on low price.

“Consumers are finally loosening their pocketbooks and it’s resulting in a good run for sporting goods retailers,” said David Magee, analyst with Suntrust Robertson Humphrey in Atlanta. Magee said other companies such as Dick’s Sporting Goods Inc. of Coraopolis, Pa., have also benefited.

Magee said the move to pricier, high-performance products has been coupled with investment in sales tracking technology to better gauge what customers are buying. Armed with this information, sporting goods companies can manage their inventories more efficiently.

For example, if high-tech ski goggles are selling briskly, the companies know about that more quickly than before and can restock them accordingly. Both Big 5 and Sport Chalet have rolled out sales tracking programs over the last 18 months.

Big 5’s Miller told the Business Journal last week that the company has contracted with QuantiSense, an Atlanta retail analytics firm, to track customer purchases.

“This has improved our allocation and customization of product on a regional and store-by-store basis,” he said, which in turn has improved margins.

Investors have shown their pleasure with both companies. Big 5’s stock climbed more than 50 percent in the days after its earnings announcement, topping the list of gainers in the LABJ Stock Index for the week ended Nov. 7. Sport Chalet’s stock rose 20 percent after its Nov. 7 earnings announcement. Both stocks fell back a bit last week amid a broader market selloff prompted by concerns over the end-of-year “fiscal cliff” and tax increases that could kick in or result from a congressional deal.

Big 5 posted net income of $8.2 million for the third quarter, up 40 percent from the same period a year earlier. Sport Chalet reported net income of $760,000, up 27 percent. Both companies reported same-store sales gains of just above 5 percent.

Snow hopes

This is not the first time both Big 5 and Sport Chalet have been on a roll with this strategy and a string of solid earnings reports. Exactly one year ago, both chains were similarly poised for their best performance year since the recession began in 2008.

But then came a winter with record-low amounts of snow, especially in the western United States where almost all their stores are located. Sales of snowboarding and ski equipment, and cold-weather outerwear plummeted, which hit the bottom lines of both companies hard.

“I was at Lake Tahoe last winter and people were pulling out their motorbikes from storage to ride them on dirt trails – that’s how little snow there was,” Levra recalled. “That really took the wind out of our sails and our performance suffered, wiping out the gains earlier in the year.”

One way that both companies hope to reduce subsequent exposure to weather variations is by boosting their online sales, giving them a low-cost way to national reach. So if another low-snow season hits the West, the companies can sell their ski and snowboard products in the Northeast – or wherever the snow is – without having to go to the expense of opening stores there.

But so far, online sales only make up a minuscule portion of overall sales at Sport Chalet, which took its online sales program in-house three years ago and has been slowly building it. Levra said online sales from other parts of the country are not yet sufficient to offset a regional weather-related slowdown.

Big 5 plans to launch its modest online sales platform next year.

In the meantime, both Levra and Miller are hoping for a more normal winter.

They are hoping for something else, too: a quick resolution to the fiscal stalemate in Washington.

“The concern is about both the prospect of tax increases hitting consumers and the overall high level of uncertainty about this,” said Sean Naughton, senior research analyst with Piper Jaffray Cos. in Minneapolis, who tracks Big 5.

Any reduction in consumer spending would deal a setback to the strategy of placing more expensive, performance-driven products on store shelves.

“We’re very concerned about the fiscal cliff,” Levra said.

Another challenge for both companies is increased competition. For example, Dick’s Sporting Goods has been expanding; it now has about 20 stores in Southern California.

Suntrust’s Magee said that until recently, a company like Big 5 was used to competing on price and bringing in moderate-income customers. But now that they and most of the other sporting goods chains are going after more affluent customers, “the key is finding a new way to stand out.”